The new frontline is mineral resources, especially rare earth elements – the next developments in this conflict include: President Trump’s claims concerning mineral-rich Greenland, a proposal for a deal on rare earth metals with Ukraine and the intensification of fighting in the Democratic Republic of Congo, which holds the world’s largest reserves of columbite-tantalite (coltan), cobalt and tantalum.
In this context, speculations on certain metals (lithium, copper, gold) are also increasing.
Record high prices have not deterred investors from buying gold. Recently, China authorized local insurance companies to invest up to 1% of their assets in gold, which we estimate could increase the pressure on its prices by about 15%.
Central banks are also buying gold, as individual countries try to build their resilience to direct or indirect duties or sanctions from the U.S. We estimate that if China were to sell 10% of the U.S. Treasury bonds it holds to allocate these funds to gold, it could increase the profitability of U.S. bonds by nearly 10 pb.
What do Greenland and Goma have in common?
Minerals and resources have become a key battlefield in the war economy. For some time now, China has been leading this race, investing in regions such as Latin America and Africa to secure key resources for its manufacturing industry.
But now the United States is also paying attention to critical mineral resources, as seen in President Trump’s claims about Greenland. This territory, dependent on Denmark, is not only rich in potential oil and gas resources, but also in 1.5 million metric tons of rare earth minerals (8th largest reserves in the world), as well as large amounts of uranium and other minerals. While Greenland is unlikely to become U.S. territory, American companies are likely to increase mining projects there, and the Danish government has already shown willingness to open the island to wider cooperation, both in terms of extraction and through increased presence of U.S. military.
At the same time, President Trump’s administration has asked Ukraine for $500 billion worth of rare earth metals in exchange for continued U.S. support in war efforts against Russia. Ukraine has the largest reserves of rare earth metals and critical minerals on the European continent outside Russia. This includes about 500,000 tons of lithium (10% of world reserves), 137 million tons of graphite (20% of world reserves) and about 2% of world uranium reserves. However, many of these mines and deposits are currently in territory controlled by Russia, which would complicate a potential agreement.
According to Allianz Trade, the next battlefield in the global race for minerals is Africa. The continent, rich in unused resources, has attracted major players. China dominates by virtue of having entered the game first and now controls entire supply chains, while the United States is expanding its influence, particularly through the Lobito corridor, to gain access to the copper belt in Zambia and Angola. France has previously controlled uranium supplies from Niger, and Morocco controls Western Sahara for its mineral resources. The EU has also signed agreements with several African countries to secure mineral supplies, although some of them, such as the agreement with Rwanda, are controversial. Indeed, since 2022, the M23 proxy group linked to Rwanda has been fuelling conflict in the mineral-rich neighbouring Democratic Republic of Congo (DRC), officially citing security concerns, but this coincides with a sharp increase in Rwanda’s mineral exports. The DRC holds the world’s largest reserves of coltan, cobalt and tantalum, essential for the energy transition.
Speculation is rising on certain metals
According to Allianz Trade, we can expect a rise in metal prices as tensions in their supply emerge over the next few quarters. Since early November 2024, aluminum prices have risen by + 1%; lithium prices have risen by + 6%, but are significantly below historic highs from the end of 2022, while nickel prices have fallen by -1%, and cobalt prices have fallen by -11%. This suggests that investors in metal markets are predominantly taking into account lower demand for industrial goods such as cars and wind turbines, rather than considering a geopolitical risk premium. However, we observe that speculative positioning is slowly rising, measured by the T Working Index, which assesses the balance between commercial and financial interests in the futures market (a high index indicates an excess of financial positioning relative to hedging needs). The speculative index is rising for lithium, copper and gold, but not for cobalt.
All that glitters is gold
In the face of uncertainty and the risk of a more protectionist US administration, both investors and central banks are buying record amounts of gold. While the U.S. dollar remains at the top of the financial system, gold is gaining popularity as a safe haven not only for investors, but also for countries threatened with duties or sanctions. Gold purchases by investors and central banks peaked in Q4 2024. In the last 15 years, the volume of purchases has been higher only during the market sell-off and recession fears in early 2016, and during the pandemic. Interest in gold is likely to remain in the near future as many emerging countries, led by China, will try to build resistance to the direct or indirect policy of the United States, which could harm them. In November 2024, the People’s Bank of China (PBoC) bought 5 tons of gold, adding another 10 tons in December 2024. China has also recently allowed its domestic insurance companies to invest up to 1% of their assets in gold, allocating up to $27 billion. At current prices, this would result in about 290 tons of gold and could increase further pressure on the price of gold by about 15%. We can expect that the launch of new mines over the next 5 years will increase the global supply of this metal by 3 to 4%, or about 3 to 4 million ounces per year until 2030. These projects will be carried out mainly in Australia, West Africa, Pakistan and Canada. While gold exploration budgets declined in 2024, they are expected to rise by more than 5% in 2025.
According to Allianz Trade, China has been diversifying its U.S. Treasury bond portfolio for 10 years – in March 2013, it held 23% of those issued and at the end of 2024, it held only about 9%. However, we do not believe that China will completely switch from U.S. Treasury bonds to gold, as this would be quite difficult operationally. Furthermore, it could also coincide with the PBoC (People’s Bank of China) selling U.S. Treasury bonds at a discount while buying gold at overpriced prices. Based on recent market reshuffles, we estimate that if China were to sell 10% of its current assets (worth about $70 billion) in order to switch to gold, this could increase the yield on U.S. Treasury bonds by about 10 pb.
Source: https://ceo.com.pl/wojna-o-surowce-grenlandia-ukraina-kongo-i-globalna-walka-o-mineraly-ziem-rzadkich-75680
